Trading in the forex market from Australia has some clear advantages over trading from the U.S. or Europe. One of the biggest advantages involves the high leverage ratios you can use for forex positions. These can range as high as 500:1 at Australian Securities and Investments Commission (ASIC) regulated forex brokers. But leverage represents a double-edged sword with losses magnified as much as profits.
Prepare yourself for the risks and rewards with our guide to trading forex in Australia.
Get Started with Forex in Australia
Many quality forex brokers from around the world offer services to Australian clients due to the country’s strong resource-based economy and vibrant financial sector. If you’ve never traded before, trading forex in Australia can be relatively easy. All you need to do is follow the 6 steps outlined below:
- Obtain a smartphone, PC or tablet with Internet access.
- Find an online forex broker that accepts clients from Australia.
- Open a margin account for trading forex with that broker.
- Deposit funds to your account using a payment method accepted by the broker.
- Download the broker’s trading platform or a platform you can use with that broker such as MetaTrader.
- Make your 1st trade.
Now your online brokerage account is ready to trade forex from Australia.
Australian Forex Trading Strategies
At this point, you’ll need a trading plan that incorporates a profitable trading strategy to make your chances of success more likely. You can practice your trading and test strategies through a forex demo account with your trading platform.
The trading strategies you can implement depend on your level of experience and trading expertise are listed below. All of these strategies have yielded positive results for retail forex traders who have developed profitable trading plans. These strategies can work for forex traders whether they trade from Australia or from some other location.
- Scalping: a short-term trading strategy that involves taking advantage of small market fluctuations. Scalpers enter and exit the market quickly aiming to capture profits a few pips at a time.
- Day trading: a day trader limits trading activity to a single trading session. The day trader buys and sells throughout the trading session but generally liquidates all positions before the end of the session to avoid the extra risk of carrying positions overnight.
- Swing trading: Swing or momentum trading involves establishing forex positions based on the signals generated by momentum technical indicators. The main objective for this trading strategy is to capture a swing move by buying at a low exchange rate and selling at a higher rate or by selling at a high exchange rate and liquidating at a lower level. The strategy has no time constraints, so traders hold positions for as long as needed.
- Trend trading: A trend trader generally has a long view on currency moves and establishes positions accordingly. The strategy involves identifying long-term moves in a currency pair, establishing a position in the direction of the trend and then letting the trend conclude before liquidating the position.
- News trading: For traders who keep an eye on economic and geopolitical news, news trading might be the right strategy. This strategy involves taking advantage of sharp exchange rate moves seen immediately after the release of sensitive economic data or news of significant geopolitical events.
This daily candlestick chart shows an upwards trend from 0.5506 on March 19, 2020 to 0.7063 on June 10, 2020 a trend trader could have taken advantage of after reviewing the displayed trend indicators. Source: MetaTrader.
Forex Trading Example in Australia
Australia’s national currency is the Australian dollar (AUD) with the code A$. The Australian dollar is divided into 100 smaller units known as cents. The Reserve Bank of Australia issues and manages the value of the Australian dollar that ranked 5th in forex market turnover among global currencies in April 2019.
A recent quote for the AUD/USD exchange rate was 0.6920 U.S. dollars to 1 Australian dollars. If your market analysis leads you to expect an increase in the AUD/USD exchange rate, then you might buy 100,000 Australian dollars against the U.S. dollar today at that 0.6920 exchange rate.
If the AUD/USD exchange rate then rose to 0.7020, then you would use the calculation below to determine your trading profits:
100,000 AUD x (0.7020-0.6920 USD/AUD) = 1,000 USD
To then convert that amount of U.S. dollar profit into Australian dollars, you would need to perform the following calculation:
1,000 USD ÷ 0.7020 AUD/USD = 1,424.50 AUD
Conversely, if the AUD/USD exchange rate had instead dropped to 0.6820, then your trading loss would be:
100,000 AUD x (0.6820-0.6920 USD/AUD) = -1,000 USD
That incurred loss converted into Australian dollars at a AUD/USD exchange rate of 0.6820 would be:
-1,000 USD ÷ 0.6820 USD/AUD = -1,466.27 AUD
Making Money with Forex in Australia
Making money trading forex from Australia depends on developing a successful trading plan. The plan should include a profitable trading strategy, a position sizing guide and a sound money management component.
Since Australian forex brokers allow traders to leverage positions by as much as 500:1, you can control sizable positions with a relatively small margin deposit when trading from Australian.
Your success trading forex will usually depend on how well your trading strategy performs and if you have the discipline to follow your plan. Any strategy that has proven successful can be incorporated into a trading plan — whether you prefer trading for short-term profits or trend trading to profit from long-term moves.
While a trading plan and strategy may seem like a lot of work, the rewards can make the effort well worth your while. Keep in mind that many strategies that initially perform well may eventually yield diminishing results due to changes in market conditions.